Crypto venture capital (VC) investments began to surge again in August despite a summer liquidity crunch across the broader crypto markets.

According to DefiLlama data, crypto VC investments rose to $633 million in August, an increase of more than 15% from $550 million in July. Much of the VC interest has been directed towards blockchain infrastructure development firms. Luca Prosperi, CEO and co-founder of M^0 Labs, stated that interest in blockchain infrastructure will continue.

“Given that we are in the early stages of development, we expect continued investments at various levels, at the infrastructure level, at the middleware level that seamlessly connects the infrastructure with the distributed application layer, and at the application layer where everything can be re-imagined,” Prosperi said.

VC capital is critical to funding the development of blockchain technology. The surge in blockchain investments in August suggests VC interest is returning to crypto from the AI ​​industry.

In another example of growing interest, VC firm Lemniscap raised a new $70 million fund for Web3 startups on August 28. Artificial intelligence-related initiatives mostly attracted attention during the summer months, especially in June.

One of the largest investment rounds in June resulted in Sentient raising $85 million to develop its open-source AI platform. This round was led by Peter Thiel’s Founders Fund, Pantera Capital and Framework Ventures.

However, VC interest is slowly returning to the blockchain space. Prosperi explained:

“With the AI ​​industry now becoming overcrowded, some deep tech investors have begun to turn their attention back to crypto. “This is partly due to the perception of a more conducive regulatory environment (which, to be honest, does not seem to be very connected to reality).”

Investors expect greater regulatory clarity in the crypto space. November’s US elections could set the tone for most global regulatory jurisdictions over the next four years. While blockchain infrastructure has attracted significant investor interest, crypto needs a “killer” use case that will support mass adoption.

Real-world use cases can attract VC interest in the application layer of blockchain. Ganesh Swami, CEO and co-founder of Covalent, said: “VCs are not yet keen on the idea of ​​investing in applications and all their interest is in infrastructure investments. You need a large user base for apps to be successful, and crypto has yet to bridge that gap. “It’s too early to invest in apps, but there are some promising signs.”

Swami noted that the approval of the first Bitcoin and Ether-based exchange-traded funds (ETFs) was the catalyst for VC interest returning from the AI ​​space.